How Banks and Fintech Startups Can Benefit from Collaboration

How Banks and Fintech Startups Can Benefit from Collaboration

With fintech startups poised to earn record funding this year, it’s clear that traditional financial institutions will have to adjust to the changing landscape of the marketplace. While some may dismiss banks as dinosaurs that are ready to go extinct, others believe that both fintech companies and banks can benefit from collaborating with one another.

Collaboration is often promoted as a means for banks to survive in a marketplace where they’re slowly losing relevance. However, this perspective ignores the fact that fintech startups are poised to enjoy key advantages from working with traditional financial institutions.

Following are just some of the ways that collaboration could benefit fintech firms:

Navigating Regulations

The process of navigating legal regulations can make developing a fintech product especially cumbersome. Many of the entrepreneurs behind these companies lack the expertise necessary to easily and efficiently address the tangled web of legal issues that naturally develop when the goal is to offer a financial service.


Banks and other financial institutions are already intimately familiar with the nature of these regulations. By working together with fintech startups, they can use their expertise to help these companies overcome this key obstacle.

Bringing Over Customers

Although fintech companies generally offer greater convenience than banking institutions, many of their potential customers are already entrenched in the traditional financial system. They have existing bank accounts with institutions that offer familiar services. Those services may not be as convenient as the services that a fintech startup could offer, but if customers feel that they already understand them, then they may be inclined to stick to what they know.

Fintech startups need to find ways to convince customers to abandon those institutions that they’ve been using for years. This is no easy task. Instead, it may be smarter to coordinate with those institutions. The startup will bring a greater degree of convenience and the bank will bring customers. If true collaboration occurs, then all parties will benefit.

Establishing Branding

Another challenge that fintech startups face relates to establishing a clear brand. Even if a startup develops useful products, its products may fail if the brand doesn’t appeal to customers.

On the one hand, it’s understandable that some fintech firms may want to distance themselves from the brands of existing financial institutions. If customers have come to associate the brands with poor customer service and outdated technology, it could be useful to establish a brand that represents a new set of values.

Then again, existing banks already have recognized brands that have yielded customer loyalty for many years. Working with a bank offers a startup the opportunity to focus on developing a useful product. Instead of being forced to cultivate their own branded identity, they could piggyback on branded identities that customers are already familiar with.

Sharing Resources

Traditional financial institutions have the customers, infrastructure, workforce, and capital. Fintech startups have the unique customer-centric perspective and innovative technology. Alone, they’re both at a disadvantage, as all of these resources are necessary for success. When banks and fintech companies compete, they’re both operating without the range of essential resources.


However, when they coordinate and collaborate, they can share resources. Fintech startups can use the funds and infrastructure of existing institutions to develop their products, while banks can use the fresh approach of newer companies to stay relevant and better serve their customers.

Marketing Products

Building a startup is a financial balancing act. You have to invest your available funds wisely. By spending too much money on research and development—a crucial element of a business—you may not have enough left over to effectively market it. Unless another round of funding comes through, you could be stuck with a useful product, but no way of getting customers to notice it.

While it is possible to employ clever, budget-friendly marketing strategies in these cases, such tactics are not guaranteed to be successful. Perhaps more importantly, simply coming up with new approaches to marketing isn’t exactly easy. Startups may not have the time to develop effective strategies.

Traditional financial institutions have already budgeted for marketing and launched years’ worth of successful campaigns. This is another instance in which a startup that has the right product but insufficient means can leverage the resources of a would-be competitor. Using the existing marketing apparatus of a bank to market a new service is easier than starting from scratch.

The conversation about fintech inevitably involves a discussion about the role that banks will play in the future. While some may think that banks are dying, that doesn’t need to be the case. Through collaboration, banks can prove to fintech startups that they still have genuine value.

Sorry, comments are closed for this post.